A business can be difficult to separate from a marriage because the two may have grown together. One spouse may have built the company from the ground up, while the other handled family responsibilities that made that work possible. In other cases, a business may have existed before the marriage but gained substantial value while the couple built their life together.
That can make the question of “who gets the business?” much more complicated than it sounds. Pennsylvania does not simply divide marital property down the middle. Instead, courts consider a range of circumstances when deciding how to equitably distribute property. Here are three factors that can affect how a business gets divided during a Pennsylvania divorce.
1. When the business became valuable
When the business was acquired can affect how it is divided. Pennsylvania considers property acquired during a marriage marital property, even if only one spouse’s name appears on the title. If a spouse owned the business before marriage, however, the analysis can become more nuanced. Pennsylvania law addresses increases in the value of certain nonmarital property during the marriage, which can make the business’s growth an important issue.
The question may not simply be whether one spouse owned the company. It may also involve how much the business was worth when the marriage began and how much it grew during the marriage.
2. What each spouse contributed
Contributions do not always appear on a business’s payroll. One spouse may manage the company while the other raises children, manages the household or makes sacrifices that allow the business owner to focus on work.
Pennsylvania courts can consider each spouse’s contributions to acquiring, preserving or increasing marital property. The law specifically includes contributions as a homemaker among the factors courts may consider.
3. How the business is valued
A privately held business does not come with a simple price tag. Its value may depend on its assets, income, goodwill, debts and other financial factors. Pennsylvania courts have discretion when evaluating evidence of a business’s value and do not have to follow one specific valuation method.
The court can also consider tax consequences and expenses associated with selling, transferring or liquidating an asset when determining an equitable division.
Looking beyond the business itself
Business division can affect more than ownership. It can impact each spouse’s financial future and, in some cases, the continued operation of a company that supports a family.
If a Pennsylvania divorce involves a business, understanding how the law treats its value and each spouse’s contributions can help put the financial issues in perspective. An experienced Pennsylvania divorce attorney can evaluate the circumstances and provide guidance based on the specific property and financial issues involved.